The company says that it will &lsquo explore viable solutions&rsquo , including talks with the end-customer, Empire Offshore Wind

 

[SINGAPORE]   Seatrium   : 5E2 -6.56% on Friday (Oct 10) announced that it had received a termination notice for a US$475 million contract inked with a Maersk Offshore Wind affiliate in 2022.

 

The contract was for the construction of a wind turbine installation vessel at the US offshore wind farm, Empire Wind 1. It is about 98.9 per cent complete.

 

The company said that it will &ldquo explore viable solutions&rdquo , including talks with the end-customer, Empire Offshore Wind, a joint venture between Equinor and BP. It did not elaborate on the &ldquo allegations&rdquo received in the notice of termination.

 

Shares of Seatrium plunged by as much as 7.8 per cent to S$2.25 in the first 40 minutes of trading on Friday. They inched back up to S$2.28 at close &ndash 6.6 per cent or S$0.16 lower than Thursday&rsquo s closing price of S$2.44. 

 

The marine engineering company said it is evaluating its legal and commercial options, including the possibility of legal proceedings for &ldquo wrongful termination&rdquo . It declined comment on the amount paid out so far on the contract, following a query from The Business Times.

 

The vessel was set to be based on Sembcorp Marine&rsquo s in-house design in collaboration with Maersk Supply Service. Empire Wind 1 was originally part of a two-phase offshore wind project with Empire Wind 2. Seatrium said earlier that the project was expected to power more than a million New York homes and play a key role in advancing the US&rsquo clean-energy transition.

 

Seatrium had also won the contracts for the engineering, procurement, construction, offshore hook-up and commissioning of two offshore substations for the Empire Wind 1 and Empire Wind 2 farms. 

 

However, its Empire Wind 2 contract, valued at more than S$250 million, was cancelled in 2024 by Empire Offshore Wind &ldquo as a result of the significant macroeconomic conditions&rdquo . 

 

Still, Empire Offshore Wind had said that the Empire Wind 1 project contract remained &ldquo unaffected&rdquo . 

 

&ldquo We believe the development is likely to have a negative near-term impact on the share price,&rdquo said Citi analyst Luis Hilado. " The emergence of any remedies and/or damage control with future disclosure from Seatrium and/or Equinor would be key to watch out for.&rdquo

 

Hilado added in a later update that Seatrium management indicated that the terminated contract was a &ldquo pre-merger deal&rdquo . 

 

Therefore, it was under a structure of 20 per cent downpayment and 80 per cent final-payment-upon-delivery. This, he said, likely has negative implications because Seatrium has realised actual costs for the build but has only actually collected 20 per cent of the revenue.

 

However, because it was a &ldquo low gross margin contract&rdquo , compared to post-merger contracts with double digit margins, the accrued profit is likely &ldquo small&rdquo . This is given that net profit margins would be even lower than the gross project margins.

 

&ldquo We still await potential solutions via their direct discussion with Equinor,&rdquo said Hilado. &ldquo In the meantime, we would note that Seatrium has a track record of triggering its share buybacks when the shares are under duress.&rdquo

 

Seatrium&rsquo s net profit for the first half of 2025 grew more than three times to S$144.4 million, up from S$36 million during the same period last year.